Logistics companies weathering economic uncertainty

More About:

A new survey shows that despite the economy, logistics companies fared well in 2011 as more shippers turned to their customized services. There were trouble spots, though, as the 19th Annual Survey of Third-Party Logistics Providers revealed that 26% of firms failed to meet their financial projections for 2011, up from 14% in 2010.

The survey was conducted by Dr. Robert Lieb, professor of Supply Chain Management at Northeastern University. Joe Gallick, senior vice president of sales for Penske Logistics presented it along with Dr. Lieb this week at the Council of Supply Chain Management Professionals Annual Global Conference. Penske Logistics sponsors the yearly report.

The survey analyzed responses from 31 large third-party logistics (3PL) company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $45 billion in revenue in 2011.

The report was co-authored by Dr. Kristin Lieb, assistant professor of marketing communications, Emerson College. It was underwritten by Penske Logistics, a provider of third-party logistics services.

The survey noted that despite the increase in companies failing to meet expectations, none of the businesses surveyed lost money in 2011 and none of the CEOs believed the industry as a whole operated at a loss for the year.

“That says these companies are becoming a lot better at adjusting their level of activity based on what the customer demand looks like,” Dr. Robert Lieb said in an interview on Penske Logistics’ Move Ahead blog.

Globally, 63% of companies either met or exceeded their revenue projections and 71% of these logistics companies experienced moderate profitability during 2011, the survey said. However, Europe continues to struggle, with 25% of companies there experiencing unprofitability.

“The difficulties facing the European market today mirror the economic instability North American logistics companies faced a few years ago,” said Dr. Robert Lieb. “Globally, industry growth and company profitability continue to increase, but at a much slower rate. As we move forward, CEOs are being cautious, forecasting lower revenue growth projections over the next three years.”

Growth areas over the next three years will include the healthcare industry, the CEOs said. Healthcare clients accounted for 6% of regional revenues in 2011, but projections suggest these will grow to 11% by 2014.

“Our aging population and ongoing technological innovations have led to a proliferation of medical devices and equipment for large and mid-sized distributors,” said Gallick. “As these companies grow, the increasing complexity and higher costs of managing logistics internally make a compelling case for collaborating with a third-party logistics provider who can help them design and implement more efficient transportation and distribution solutions.”

The survey also predicts all regions will likely see lower revenue growth over the next year as they look to increase flexibility through more collaboration and integration of supply chain activities.

“There are some concerns that they have started to see some slowdown in the second half of 2012 and there are concerns heading into 2013,” Dr. Robert Lieb said in the Move Ahead blog post.

Gallick said another development is occurring, thanks in part to fuel and equipment costs, the driver shortage and the growing maze of regulations such as CSA and hours of service.

“The 3PL survey data reveals what we see every day, namely that the increasing complexity and higher costs of running and owning a private truck fleet, for example, make a very compelling case for switching to a dedicated transportation solution,” he said in the Move Ahead blog.

One company that is focused on growing its business is C.H. Robinson Worldwide. The company has announced a new division called ChemSolutions. This division will focus on providing logistics solutions such as multimodal transport and safety, customs brokerage, global trade management and vendor and supplier compliance for chemical manufacturers worldwide.

A research note from Zacks Equity Research on C.H. Robinson Worldwide’s plans noted the growing trend toward 3PL services.

“We believe the demand of 3PL services is rapidly growing as shippers seek cost-effective, one-stop solutions for their freight forwarding requirements,” the note said. “Given the vulnerability involved in chemical shipment, it is important for the shipper to seek logistics services from companies that have expertise in handling chemicals shipments. Given CH Robinson’s network and service capabilities in freight services, we believe the company will be able to tap potential opportunities in the new business and foster its presence in the global freight market.”

According to Zacks, logistics providers are also taking advantage of European growth and the lack of capabilities of transport firms there.

“Most of the shipping is taking place in countries stretching from East to West Europe or on a transcontinental basis. However, given the lack of service capabilities within the European truck industry, 3PL carriers like C.H. Robinson are benefiting from this new business opportunity,” the note said.

Zacks did state that the market for freight forwarding and customs brokerage is extremely competitive right now and expected to remain so in the near future.

Dr. Robert Lieb, though, cautioned that the fragile economy of Europe could still have a major impact on 3PL services here.

“Much of what happens here is going to be contingent on what happens in other parts of the world,” Lieb said. “If the Eurozone financial situation gets worse, that affects us because the economies are so closely linked.”

Another toast that it's not very often seen in the weddings is the mother of the groom speech. Like the bride's mother, she will also give an emotional speech, remembering the great moments she and his son spent together

Gangaur Realtech is a professionally managed organisation specializing in real estate services where integrated services are provided by professionals to its clients seeking increased value by owning, occupying or investing in real estate....SEO Glasgow

Gangaur Realtech is a professionally managed organisation specializing in real estate services where integrated services are provided by professionals to its clients seeking increased value by owning, occupying or investing in real estate....How to Unlock iPhone 4s

Gangaur Realtech is a professionally managed organisation specializing in real estate services where integrated services are provided by professionals to its clients seeking increased value by owning, occupying or investing in real estate...Airport SUV

Thank you for the work you have put into your nice blog. We will bookmark to your blog because it is very informational. We love the site and will come back to see your new posts....designer kitchen appliances

I recently discovered your blog and still have high hope for this to carry on. Keep up the good perform, their nearly impossible to find beneficial ones. We have added to our faves. As well as the concept of Many thanks. For more info visit on How to choose a memory foam mattress